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Canopy selling cannabis facility back to chocolatier Hershey for CA$53 million

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A Canopy Growth Corp. flagship facility that was once emblematic of the prospective wealth and new beginnings of the country’s legal cannabis industry is being sold back to its original owner, chocolate maker Hershey Canada.

The sale of the Smiths Falls, Ontario, facility – for 53 million Canadian dollars ($39 million) – is part of Canopy’s drive to shed costs and transition to an “asset-light” model, the struggling company said in a news release.

But it’s also symbolic of Canada’s faltering marijuana industry, which has sustained more than $20 billion in losses.

Canopy – which has yet to record a profit – has lost almost CA$6 billion since becoming the first cannabis company to go public in 2014, when it was known as Tweed Marijuana.

Back in February, Canopy said it planned to shutter the Smiths Falls facility and lay off 800 workers to save money.

The facility has a rich history and has undergone a major transformation over the past 15 years.

Hershey stopped producing chocolate in Smiths Falls in 2008, leaving the plant empty for years.

In 2013, Tweed Hershey Drive – a company affiliated with Canopy Growth – bought the plant from Icon International, a specialized finance company in Canada and the United States, according to local media reports at the time.

“This is the latest milestone in our focused effort to reduce costs and further enhance our balance sheet,” Canopy CEO David Klein said of the facility’s sale back to Hershey.

“Once again, we have demonstrated Canopy Growth’s ability to achieve significant organizational and operational change to position the Company for future growth in the Canadian market.”

In announcing the pending sale Thursday, Canopy said it will retain its Smiths Falls-based post-harvest manufacturing facility.

Canopy plans to centralize its post-harvest manufacturing at its former beverage facility in Smiths Falls.

In addition, the company is moving its head office across the street.

The former beverage facility has been retrofitted to support both post-harvest manufacturing and office functions, Canopy told MJBizDaily in an emailed statement.

For almost three years, Klein has been unwinding many of Canopy’s decisions, and the Hershey facility sale is the latest example.

This year alone, Canopy has grossed roughly CA$155 million from the sale of seven properties, the company said in its release.

The foundation for Canopy’s losses was largely laid by former executives, who aggressively expanded the business across Canada and around the world.

The problem was the company – and the industry – overshot production capacity and overestimated demand for cannabis products.

By 2017, before adult-use marijuana was legal, Canada’s licensed producers had bankrolled more than enough production capacity to meet demand for recreational cannabis.

But companies kept building and buying, and by 2021, Canadian cannabis businesses had sold less than 20% of the marijuana they had produced – a major factor in the industry’s mounting losses.

Canopy, for its part, bought large greenhouses in Canada and overseas in Colombia, Denmark and Lesotho.

Unwinding those purchases, which started in late 2019, has affected thousands of workers.

In 2020, Canopy said it was ceasing some cultivation in Africa, Canada, Colombia and the United States to “improve efficiencies” in its global operations.

Months later, Canopy shuttered more facilities across Canada to save money.

Canopy also unloaded greenhouses in British Columbia, which it once touted as the largest cannabis greenhouses in the world.

Canopy shares trade as WEED on the Nasdaq and Toronto Stock Exchange.

Source: https://mjbizdaily.com/canopy-growth-selling-cannabis-facility-back-to-hershey-for-ca53-million/

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New Mexico cannabis operator fined, loses license for alleged BioTrack fraud

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New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.

The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.

Golden Roots operates the The Cannabis Revolution Dispensary.

The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.

The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.

Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.

After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.

In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.

The company requested a hearing, which the regulator scheduled for Sept. 1.

At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.

Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.

Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.

The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:

Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.

Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/

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Marijuana companies suing US attorney general in federal prohibition challenge

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Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.

According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”

Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.

The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”

The companies want the case to go before the U.S. Supreme Court.

They hired prominent law firm Boies Schiller Flexner to represent them.

The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.

Similar challenges to the federal Controlled Substances Act (CSA) have failed.

One such challenge led to a landmark Supreme Court decision in 2005.

In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.

In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.

Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.

“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.

“Moreover, the facts on which those precedents are based are no longer true.”

Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”

While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.

“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”

Source: https://mjbizdaily.com/marijuana-companies-suing-us-attorney-general-to-overturn-federal-prohibition/

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Alabama to make another attempt Dec. 1 to award medical cannabis licenses

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Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.

The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).

Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.

Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.

That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.

Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.

Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.

A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.

Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/

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